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Oil advances as Abu Dhabi sees US$60 crude on shrinking surplus

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Oil advanced as Abu Dhabi forecast prices could climb as high as US$60 a barrel amid a glut that's dwindling more quickly than projected.

[LONDON] Oil advanced as Abu Dhabi forecast prices could climb as high as US$60 a barrel amid a glut that's dwindling more quickly than projected.

Futures rose as much as 1.3 per cent in New York. The global surplus is down to 1.2 million to 1.5 million barrels a day and has contracted faster than expected, Ali Majed Al Mansoori, chairman of the Abu Dhabi Department of Economic Development, said in a Bloomberg Television interview. 

Oil has surged about 85 per cent from a 12-year low earlier this year on a combination of unexpected supply disruptions and a persistent decline in US output, which is under pressure from the Organization of Petroleum Exporting Countries' policy of producing without limits. Members of the group refrained from adopting a new output ceiling last week, with outgoing Secretary-General Abdalla El-Badri saying that it's difficult to find a target as Iranian supply rises and significant Libyan volumes are halted.

"The rebalancing process is under way, but we still see some minor surplus in the second half," said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. "The journey from an oversupplied to a sustainably balanced oil market is not yet over."

West Texas Intermediate for July delivery gained as much as 65 cents to US$49.27 a barrel on the New York Mercantile Exchange and was at US$49.16 at 12:01 pm London time. The contract slid 55 cents to US$48.62 on Friday, capping a 1.4 per cent weekly decline. Total volume traded was about 41 per cent below the 100-day average.

Oil Recovery Brent for August settlement increased as much as 69 cents to US$50.33 a barrel on the London-based ICE Futures Europe exchange. Prices slipped 40 cents to close at US$49.64 on Friday. The global benchmark crude was at a 54-cent premium to WTI for August.

The market recovery is on track and a price range of US$55 to US$60 is possible this year, Mr Mansoori said. Abu Dhabi controls most of the oil reserves in the United Arab Emirates, Opec's fourth-largest producer. The UAE holds about 6 per cent of world crude deposits.